Wht to do if I sent over my W-2 to my payroll company last week trying to change my dependents back from 9 to 1 but it wasn’t changed?

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Wht to do if I sent over my W-2 to my payroll company last week trying to change my dependents back from 9 to 1 but it wasn’t changed?

Now, when my W-4 comes, it will have the 9 dependents on it. Will I owe the IRS and state? Since the payroll company was supposed to change it that day, who is liable?

Asked on January 5, 2013 under Employment Labor Law, New York

Answers:

SJZ, Member, New York Bar / FreeAdvice Contributing Attorney

Answered 8 years ago | Contributor

Yes, if you are having more withheld than you'd like, you will have to pay the IRS at tax time. But the payroll company is not liable, because you are not paying any more total--all that's different is that you're paying it later, not sooner.

Example, with simple, made-up numbers. Say you earn $5,000 a month and are paid once monthly. Say that you are in a tax bracket such that you pay 25% of your income in taxes. That means you earn $60k per year and pay $15k in taxes. If you have minimal withholding (lots of dependents), only, say, $500 is taken out per paycheck. That means that $500 is taken out each month, or $6,000 per year. You will then owe another $9,000 when you file your taxes.

On the other hand say that you have a great deal withheld (0 or 1 dependents) and $1,500 is taken out per check, or $18,000 per year. At the end of the year, you'd get $3,000 back from the IRS (tax refund).

In both cases, you pay a total of $15,000 in taxes. Changes in withholding do not change your total tax liability--it just changes whether you have the money withheld up front, or pay it out on the back end. Since there is no actual extra cost to you, there would be no liability for the payroll company, frustrating as this undoubtedly is.


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